Citibank, the nation’s largest credit card issuer, came to an agreement with New York to block online gambling transactions using its credit cards. "Americans now waste $4 billion a year on this pernicious form of gambling," New York’s Attorney General said. "With this agreement, we will cut off an enormous line of credit that was a jackpot for illegal offshore casinos." The bank also agreed to pay $400,000 to nonprofit groups that counsel and help families hurt by gambling additions.

Citibank previously resisted pressure to block gambling charges, even though other major credit card issuers had done so, including Bank of America, Fleet, Direct Merchants Bank, MBNA, and Chase Manhattan Bank. The New York Attorney General’s investigation, however, resulted in this settlement. Citibank controls approximately 12 percent of the U.S. credit card market.

Meanwhile, the House Judiciary Committee took action on Internet gambling on June 18, 2002, approving the Combating Illegal Gambling Reform and Modernization Act [pdf format] that would make it illegal to use the Internet or other new technologies to operate a gambling business. Federal regulators would be authorized to close down gambling sites found operating through U.S.-based Internet service providers, and would give law enforcement the ability to stop credit card payments to offshore Internet gambling sites. Before coming to a full House vote, the bill must undergo reconciliation with a similar bill approved by the House Financial Services Committee.

Why This Matters: With 12 percent of the U.S. credit card market, Citibank’s participation should give the embargo on online gambling credit a significant boost. Critics of the online gambling bill complain that so many exemptions were included to gain votes that the resulting bill lacks teeth.

This article originally appeared in ADLAW By Request, a publication of Hall Dickler Kent Goldstein & Wood LLP.

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